Self-Employed Sales Consultants
Do You Sell Goods
From Home or Door-to-Door?
Picking up a second job to supplement household income in a tough economy
is becoming more common. Many Americans are choosing to become consultants
who visit homes to sell make-up, jewelry, candles, kitchen utensils and
food products. Some may not realize the tax implications of becoming a
sole proprietor and what they need to do to
file taxes.
Your first step when starting a business is to open a separate business
checking account. It will be easier to track your deductible expenses if
they are not commingled with your personal expenses. If you incurred
expenses prior to opening your business, keep them separate from your
other expenses. Special tax treatment applies to start-up expenses.
It’s also important to keep track of your mileage, because you might be
able to deduct it on your tax return. If you are self-employed and
maintain an eligible office in your home, you can deduct the mileage to
and from your client’s or customer’s place of business, as well as between
jobs.
There are two ways to calculate your auto deductions: the standard mileage
rate or actual expenses. The standard mileage rate is the easier method to
use because you simply take your total business mileage and multiply it by
the current rate ($.51 for 2011).
The actual expense method requires you to record the actual expenses, such
as the cost of gas, oil, insurance, repairs, maintenance, tires, washing,
licenses and depreciation.
If you use your car for personal and business purposes, you’ll have to
divide the expenses between the personal and business portion, so keeping
detailed records is a must. The business miles for the year divided by the
total miles for the year determine the business percentage of your actual
expenses.
